"There was a pile of insulation sandwich panels which are used in the construction of cool rooms in the centre of the factory warehouse which was being demolished," inspector Jones said.

"Workers using oxy torches seemed to have sparked the fire.

"Three Fire and Rescue trucks were there and they extinguished the fire using two lines of hose."

A post on the RFS MIA district Facebook page confirmed the four trucks that were called to assist, although it appeared the blaze was under control before they arrived.

"Beelbangera, Bilbul, Hanwood and Myall Park brigades are assisting Fire and Rescue at a structure fire at the ammunitions factory in Yenda," the RFS wrote.

Police were also on site to close off Doug McWilliam Road to traffic.

McWilliam's Wines sold the Yenda winery, which was built in the 1920s, to wine industry giant Casella Wines in 2006 as part of a rationalisation process to improve their main Hanwood site.

The Yenda facility was subsequently relaunched by Marcello Casella in August 2011 as one of only two ammunitions factories in Australia, with permission to store 5000 kilograms of gunpowder on the premises.

The Area News reported in May 2012 the demand for high-quality 12-gauge shotgun shells meant owners had plans to double the site's production to 20 million cartridges per year, create a new laboratory and build storage for another 4500 kilograms of gunpowder.